Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data

This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time e.ects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age expenditure pattern for consumer durables. We find hump-shaped paths over the life cycle for total, for nondurable and for durable expenditures. Changes in household size account for roughly half of these humps. The other half remains unaccounted for by the standard complete markets life cycle model. Our results imply that households do not smooth consumption over their lifetimes. This is especially true for services from consumer durables. Bootstrap simulations suggest that our empirical estimates are tight and sensitivity analysis indicates that the computed profiles are robust to a large number of different specifications.